If you’ve watched the popular TV flip shows, I’m sure you’ve thought about the prospect of jumping in yourself to make some fast cash.
Here are some things you may want to think about before taking the leap.
Where are the soft costs? Insurance, taxes, utilities, commissions, finance costs. Figure 2% to buy, 8% to sell, 3% to finance, and 2% per month to carry. The returns look alot slimmer when these costs are accounted for.
Is the market rising? If your flip doesn’t work in a flat market, you shouldn’t buy. You can’t control the direction of the housing market and it shouldn’t be part of your plan.
Are you getting special deals and faster turnarounds from your contractors in return for TV exposure? You don’t have your own TV show so don’t expect contractors to jump to it for you. There’s plenty of work out there right now and you may need your contractors more than they need you.
You’ll also likely hear about them “coming to your town to teach their secrets”. Unfortuntately, most of their training revolves around no money down strategies. I can tell you from experience that no money down almost never works. Then why do they preach it? Because in order to sell their training to the masses, they have to appeal to the average person with little savings. And they need to offer the elusive fast wealth without sacrifice.
My advice? Live beneath your means. Save your money. Keep your credit squeaky clean. Find a home in a good neigbhorhood in need of TLC, clean it up and rent it for the long term. The best way to get rich is to get rich slowly
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